KCB sets sights on making its mortgage business subsidiary


KCB Group CEO Paul Russo during the bank's 2022 full-year financial results investor briefing on March 16, 2023. PHOTO | DENNIS ONSONGO | NMG

KCB Group is mulling the spin-off of its mortgage business into a distinct subsidiary, a move that could potentially reverse the 2009 consolidation of S&L Mortgages, then a subsidiary, into KCB Kenya.

Group CEO Paul Russo says the group is in the process of streamlining mortgage lending which posted the second highest non-performing loan ratio at 20.8 percent in the 9 months that ended September 2023, placing it second only to corporate business whose non-performing loan ratio was 28.4 percent.

Mr Russo says a return of the S&L Mortgages subsidiary could be the start of the group’s renewed dedicated focus to address the competencies required to tackle bad debt in the mortgage book. KCB is estimated to account for 29.7 percent of the banking sector’s mortgage book, placing it at about Sh77.8 billion.

The group has tapped Caroline Wanjeri Kihara, who headed the mortgage business between June 2015 and October 2020 before being deployed to head KCB Foundation, to steer the renewed focus on curing delinquencies in the mortgage book.

“One of the things that we have done is just to make sure that there is closer management. Two or so years ago, KCB made the decision to split the mortgage business into retail and corporate, we have now reversed that and we will re-group that team under very experienced internal resources,” Mr Russo said.

“For a while, Caroline ran our mortgage business then she went to run the Foundation and we have made the decision to bring her expertise back”, Russo told the Business Daily.

In 2009, KCB integrated its S&L subsidiary to be a mortgage unit within the KCB Bank Kenya business in an undertaking that sought to realign operations even as the S&L brand was retained within the business.

“The question the board has asked me is whether we are bringing S&L back and I said it probably is step one towards that direction. Mortgage is a specialist product and the value of running it under experts is something that we recognize and I chose to make that call. There could be a lot of appetite because of the direction the country is going with affordable housing but you need experts to monitor the risk,” Russo says.

According to the Central Bank of Kenya, there were 27,786 mortgage facilities in the Kenyan market as at the close of 2022 with an outstanding value of Sh261.8 billion, a 6.8 percent increase from the amount registered at the close of 2021.

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